Choosing between cash and mortgage when buying your home

If you live in Australia, you hear how bad it is to carry around debt. So obviously, it’s normal to think that buying home with cash – or dropping as much cash as possible into your home to sidestep enormous debt that comes with mortgages, is the top choice for your financial health.

The truth is that there’s a lot to consider when contemplating purchasing a home with cash versus acquiring financing through a mortgage.

Cash can cut costs and win bid wars.Paying cash when buying a home eradicates the need to pay interest on the loan and many other closing costs. When buying a house with cash, there are no applicable mortgage origination fees, appraisal fees or other fees normally charged by lenders to assess buyers. Cash payingis also more attractive to sellers. In a competitive market, a seller is likely to take the cash offer over others since they don’t need to worry about a buyer backing out.

A cash home purchase also has the flexibility of closing faster if you want than one requiring financing, which could be the best choice to a seller. If you’re currently looking to buy your first home,  a Lendlease home and land package in Epping North, VIC is a good choice. If you have the capacity to pay in full as you’ll be buying from a good developer in an expert-planned community, which has a bigger chance for growth and added value in the future.

In any case, a cash buyer’s home is not leveraged, which allows the homeowner to sell the house more easily, and even at a loss – regardless of the market conditions.

Mortgage is also a viable option. Financing also has a couple of benefits. Even if you have the ability to pay cash for a property you’re eyeing, it might not make sense to tie up all your money to purchase real estate. Doing so may tie your hands down the road. By opting with a mortgage, you can give yourself some flexibility.

Selling a home bought with cash may also become a big problem if the owners strained a lot financially to purchase it. If cash buyers decide it’s time to sell, they need to make sure they will have sufficient cash reserves to put down as a deposit on the new home.

Depending on the stock market’s state, saving on mortgage interest by paying cash might not be financially practical. You could be making less than that money might have earned if only you have taken out a mortgage and devoted the cash you did notinvest on your house in the market.

End Note

When considering which option will make the most senseto you, opt for the one that can give you the bigger bang for your buck.If you decide to obtain a house with a loan, make sure you can afford the principal, interest, homeowners insurance, property taxes, homeowner association and other fees each month.

Also, ask yourself which of your options will provide the greater return on your investment. Take for instance a Lendlease home and land package in Epping North, VIC, an expert-planned community, which has a bigger chance for growth and added value in the future.

 

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